Thanks to bandwidth demand, anything optical was the golden child of the VC world during the last couple of years. According to the National Venture Capital Association, venture capitalists invested $807 million in 75 optical companies in 1999 and showered $2.6 billion on 161 firms the following year. Telecom carriers were building out optical networks at breakneck speed. In October 2000, telecom market-research firm RHK forecast that service providers' global capital expenditures would grow from $306 billion in 2000 to $370 billion in 2001, a 21 percent increase. But, when the economic downturn affected the seemingly invulnerable telecommunications industry in late 2000, the distribution of VC funds, spending by telecom carriers, and network expansion were all scaled back considerably. Few optical companies escaped the precipitous drop in stock valuations and substantial layoffs. As further testament to tough times, in June, RHK forecast that the worldwide market for optical components for terrestrial dense wavelength division multiplexing (DWDM) and optical-networking applications will decline 11 percent in 2001.
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